NG-70-07-102-EN-C
Trade Barriers Regulation [ TBR ]
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http://ec.europa.eu/trade/issues/respectrules/tbr/index_en.htm
For further information I DG Trade I Unit F2 (Legal Aspects of Trade Policy) I Tel. +32 2 295 39 18 I E-mail : trade-tbr@ec.europa.eu
European Commission I Directorate General Trade
Published in all the EU languages by the European Commission’s Directorate General Trade.
The information contained in this brochure does not necessarily reflect
the official positions of the European Union.
Neither the European Commission nor any person acting on its behalf is responsible
for the use which might be made of the information which follows.
Use of the text, in whole or in part, is authorised provided the source is acknowledged.
© European Commission, 2008
ISBN 978-92-79-07476-9
Design/Illustrations/Pre-press: Mostra Communication
Printed in Belgium, February 2008
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Trade
Barriers
Regulation
[ TBR ]
Table of contents
P. 4
What is
the Trade Barriers Regulation
(TBR)?
P. 5
Who can use
the TBR?
P. 7
How the system operates
in practice:
the TBR procedure
P. 10
How to prepare
a complaint?
• Scope of the TBR
• First track:
Trade barriers with an effect
on export markets
• Lodging of a complaint
• Identification of the complainant
and definition of the goods
or services affected by
the obstacle to trade
• Second track:
Trade barriers with an effect
on the EU market
• Investigation and report
• Target of the instrument:
obstacles to trade
• Decision on admissibility
• Identification of the product
(or service) which is being
adversely affected by
the trade barrier you want
to have challenged.
• Evidence of the existence
of the obstacle to trade
• Existence of a right of action
of the Community under
international trade rules
• Evidence that the obstacle
to trade results in injury
or adverse trade effects
2
P. 14
What can be achieved
by a complaint?
P. 17
TBR:
10 years of experience
P. 19
TBR
Case Studies
P. 28
Annex
• Satisfactory steps taken
by third country
• Who has the TBR helped?
• Satisfactory action
by a third country
• Customs formalities
• Formal agreement
with third country
• Initiation of international
(WTO or other) dispute
settlement procedure
• In what countries
have problems occurred?
• What type of problems
has the TBR investigated?
• Intellectual property rights
(IPRs)
• Cases where follow-up action
is necessary
• Technical regulations
• Recourse to WTO dispute
settlement proceedings
• Subsidies
• Who lodged the complaints?
• Tax discrimination
• How successful has
the TBR been to date?
3
What is
the Trade Barriers Regulation [ TBR ] ?
In the context of the progressive liberalisation of world trade in goods and services,
it is vital that trade policy instruments maintain third country markets open for
European Union (EU) exporters. Consequently the Council of the European Union (EU)
adopted the Trade Barriers Regulation in December 1994 (Council Regulation N°3286/94)(1)
which came into effect on 1 January 1995.
Scope of the TBR
The TBR is a legal instrument that gives the right to EU enterprises, industries or their Associations as well
as the EU Member States to lodge a complaint with the European Commission who then investigate and
determine whether there is evidence of a violation of international trade rules which has resulted in either
adverse trade effects or injury.
The TBR is an instrument aimed at opening third country markets by eliminating obstacles to trade
for the benefit of EU exporters.
The TBR has a broad scope of application that applies not only to goods but also to services and
intellectual property rights, when the rules concerning these rights have been violated and had an impact
on trade between the EU and a third country.
Target of the instrument: obstacles to trade
A wide range of obstacles to trade or trade barriers is covered by the Regulation and the Annex provides an
illustrative list of some of the trade obstacles that are covered by the TBR. An obstacles to trade is defined in
the Regulation as “any trade practice adopted or maintained by a third country in respect of which international
trade rules establish a right of action”. In this context, international trade rules are primarily those established
under the World Trade Organisation (WTO) or, since February 2008, those contained in bilateral Free Trade
Agreements.
The TBR is designed to ensure that the rights of EU under international trade agreements can be enforced in
cases where non-EU (i.e. “third”) countries “adopt or maintain” barriers to trade.
( 1)
Published in O.J. L349 ,31.12.1994 last amended by Regulation (EC) N°356/95, 20.02.1995 published in O.J L41,23.02.1995.
4
Who can use the TBR?
Complaints can be lodged against the following two types of trade barrier:
a non-EU country enforces a trade barrier which adversely affects exports
from EU Member States; or
a non-EU country enforces a trade barrier which adversely affects the EU market.
For instance where a trade barrier prevents the EU from obtaining a commodity
it requires.
First track:
Trade barriers with an effect on export markets
A complaint may be lodged with the Commission by one or more EU enterprises, or an association acting
on their behalf which has or continues to suffer adverse trade effects as a result of a trade barrier (i.e. a law,
regulation etc) imposed by a non-EU country.
Article 2(6) of the TBR(2) defines the term “Community enterprise”. As of February 2008, four complaints have
been lodged so far by individual companies. The first case was against Brazil and their non-automatic import
licensing with regard to Sorbitol. The complaint was lodged by Cerestar, one of the largest EU producers of
Sorbitol. The second case, again concerning a trade barrier in Brazil, was lodged by Dornier, the German aircraft
manufacturer, as regards the export subsidies the Brazilian Government was giving to one of their aircraft
manufacturers, Embraer. The third case was lodged by Volkswagen as regards the discriminatory VAT legislation
that had been introduced by Columbia. The fourth complaint was submitted by Philips, the electronics
manufacturer, and concerned the compulsory licensing of CD-R technology by Taiwanese authorities.
( 2)
“the term “Community enterprise” is defined in article 2(6) of the TBR as a company or firm formed in accordance with the law of a Member State and having its
registered office, central administration or principal place of business within the Community, directly concerned by the production of goods or the provision of
services which are the subject of the obstacle to trade. This means for example that a subsidiary can lodge a complaint under the TBR whereas a branch cannot.
5
However, this route is not confined to a single enterprise, or group of enterprises, and can equally be used by
an association that acts on behalf of one or more of its members. Many complaints have been lodged by
either national associations of the EU Member States or by European associations and have covered a variety
of industry sectors. For instance ANAPA, the Spanish National Association of owners of deep-sea longliners, or
Febeltex, the Belgian textile federation have brought cases on behalf of their members. Similarly CESA (the
Committee of European Union Shipbuilders associations) lodged a complaint with the Commission under this
route.
The TBR differs from other trade policy instruments such as anti-dumping or anti-subsidies where the
complainant must represent a major proportion of the EU industry. Indeed, the TBR is the only trade policy
instrument which gives the right to an individual company to present a complaint to the European
Commission.
Second track:
Trade barriers with an effect on the EU market
Under this track, a complaint can be lodged by an EU industry or professionally recognised/accredited
association acting on its behalf, which has suffered material injury from trade barriers having an effect on the
EU market.
Article 2(5) of the TBR defines the term “Community industry”. As a rule, the second track is only open for
producers that account for a major proportion of total Community production of identical, similar or directly
competing goods or services and who have been affected by the trade barrier.
So far, there have been only four cases which have considered material injury in the EU market, as well as
adverse trade effects in a third country market. No TBR case has been based exclusively on injury in the EU
market. In part this is due to the fact that distortions in the EU market are normally best addressed through the
antidumping and countervailing duty instruments.
In addition to industries, associations or individual enterprises, EU Member States could also lodge a
complaint in respect of either of the above types of obstacles to trade. However to date none of them have
chosen to do so.
6
How the system operates in practice:
the TBR procedure
The procedure under the TBR operates broadly as follows:
Lodging of a complaint
Assuming that you have been affected by a trade barrier, what should you do next? Do you, for example
have to launch a formal proceeding without having had the opportunity to discuss your problem with the
Commission?
The answer is no, and in fact the Commission would always advise you to contact them in order to discuss the
case and to consider the various options that might be available to you. The Commission Service responsible
for the Trade Barriers Regulation falls under the Directorate General for Trade. The contact details are given
below. Contacts prior to the lodging of a complaint should be directed to Head of Unit F-2 (Legal Aspects of
Trade Policy). The formal complaint must be submitted to the Commission in writing at the following address:
European Commission
Directorate General for Trade
Unit F.2 - Legal Aspects of Trade Policy
B-1049 Brussels
Tel: 32-2 295 39 18
Fax: 32-2 299 32 64
Decision on admissibility
Procedure
When your formal complaint is received by the Commission, the first step will be to send it to the EU Member
States for their comments which will be conveyed back to the Commission. Under the Regulation the
Commission has to decide whether the complaint is admissible within 45 days of your complaint being lodged.
However this deadline may be extended at your request, if you require further time to provide further
information. If the Commission considers that you have provided sufficient evidence to justify initiating an
examination procedure and that it would be in the Community’s interest do so, the Commission will confirm
to you that your case has been accepted and that an investigation will be launched. At the same time the
Commission’s decision will be published in the Official Journal of the EU in order to inform all those that may
be affected by the barrier, including the country having imposed it.
7
So how do you convince the Commission that your case warrants action under the TBR? What do you need to
provide in order that the Commission’s decision will be in favour of launching an investigation?
The TBR regulation requires that a complaint, in order to be considered admissible, must “contain sufficient
evidence of the existence of the obstacle to trade and of the injury or adverse trade effects resulting therefrom.”
In layman’s terms this means that there are three elements that need to be established:
the existence of the measure;
the evidence that the measure is contrary to international obligations (right of action)
the evidence of adverse trade effects or injury(3).
These terms will be explained in greater detail in later sections. A step-by-step guide will take you
through the kinds of information you will be expected to provide when lodging your complaint.
You may also wonder what is meant by Community interest. Why should this factor into the Commission’s
decision when the obstacle is affecting you? There are many possible reasons why an examination procedure
would be in the interest of the Community. Reasons may include the guarantee that trading partners fully
comply with their international obligations, the safeguard of access of Community products to third country
markets, the protection of economic interests within the Community against practices incompatible with
international trade rules. However, the Commission may decide not to initiate an examination procedure where
such action does not appear to be in the interest of the Community. So far though, the Commission has not
taken such a decision.
( 3)
See Section “How to prepare a complaint?”
8
Investigation and report
During the investigation period the Commission will gather and verify all the relevant information from
interested parties. This could, for example mean obtaining the various rules and regulations that a country has
imposed. It could also involve talking to industry associations, Government Departments etc… in the country
with whom you have been experiencing problems. The Commission will be keen to hear the views of all
interested parties and will endeavour to start discussions with the authorities of the third country concerned
in order to see whether the trade barrier could be removed. In other words the investigation is used in part
to “test the water” as to possible remedies whilst at the same time gathering all the information that would
be required to allow a proper analysis of the complaint.
Of course throughout this process you would be in contact with the Commission team following your case
and your continued involvement would be necessary in order to achieve the best possible result. You might,
for instance, be required to provide sensitive information that you would not want to see falling into the hands
of your competitors. This is one of the fears we often hear, but you need not worry as Article 9 of the TBR
provides for the specific treatment of confidential information supplied during the investigation (4). Such
information will not be disclosed at any stage without your prior approval and authorisation.
So how long will this all take?
The investigation should not last more than five months, unless its complexity is such that the Commission
extends the period to seven months. At the end of the investigation, a confidential report will be submitted
to the Member States and a public version of the report will also be made available. The investigation is a crucial
phase of the TBR procedure, since it:
helps to clarify the factual and legal issues, thus strengthening a possible WTO action,
It may encourage a third country to solve the trade obstacle at stake (for example, in the case “Korea
legislation on cosmetics”, negotiations in the course of the investigation permitted to abolish previous
burdensome pre-market procedures).
The investigation report will normally include the following elements:
a factual analysis of the third country practice;
a legal analysis of the third country practice (incompatibility with WTO rules);
an examination of the adverse trade effects on the market of the third country and/or of the injury
on the market of the Community and their impact on the economy of the Community;
the conclusion and envisaged course of action.
( 4)
The TBR provides that no information of a confidential nature received pursuant to the Regulation or any information provided on a confidential basis by a party
to an examination procedure shall be revealed without specific permission from the party submitting this information.
9
How to prepare a complaint?
In this section we will be looking at what you will need to do once you have decided,
following informal contacts with the Commission, that you want to proceed with lodging
a formal complaint.
The Commission service in charge of the implementation of the TBR is Unit F-2
(Legal Aspects of Trade Policy) of the Directorate General for Trade.
You can reach us either through DG Trade’s website:
http://ec.europa.eu/trade/issues/respectrules/tbr/index_en.htm
or by e-mail: trade-tbr@ec.europa.eu
The following elements will need to be included when submitting your written complaint
to the Commission:
Identification of the complainant and definition of the goods
or services affected by the obstacle to trade
Identification of the complainant
Your Company’s Name and address, legal status.
What does your company do? A short general presentation will be sufficient i.e. an indication of your
business activity, including figures on your turnover, production levels, number of employees, market
shares in both the home (EU) and overseas markets.
Link with the product, which is the subject of the obstacle to trade (producer, producer of a competing
product, transformer, importer, exporter).
Identification of the product (or service)
which is being adversely affected by the trade barrier
you want to have challenged
Description of the product (or service) and customs code (CN) to eight digits.
Production, sales and imports and exports of the product or service by your company.
10
Evidence of the existence of the obstacle to trade
You will need to provide as much evidence of the existence of an obstacle to trade as possible. This means that
the complaint should include sufficient elements in order to demonstrate the existence of the obstacle to trade
The evidence required may depend on whether the complainant argues that a law or regulation is contrary to
WTO obligations (de jure cases), for example by the imposition of an import ban, or whether the complaint is
based on the actual application of a regulation or on the impact on the market of certain measures or practices,
such as subsidies (de facto cases).
For de jure violations evidence of the existence of the measure (e.g. the text of the law or regulation) would
usually suffice.
For de facto violations, i.e. when it is the enforcement of the legislation or administrative practices that
create barriers to trade (example: non-transparent or burdensome customs valuation procedures),
the complainant should provide any available evidence of its claim such as letters or faxes from sales
agents, importers, clients…confirming the existence of a trade practice and the involvement of public
authorities in such a practice. For example, complainants in the past have provided us with declarations
from importers and or from their customs agents, examples of import files and declarations from users
of the product. This list is not exhaustive and requirements are flexible.
TBR cases cover a very wide array of obstacles so that each case is an individual problem, which need to be
treated specifically. In this respect, the Commission services can help in identifying the issues to be addressed.
Existence of a right of action of the Community
under international trade rules
In order to fulfil this requirement you will need to invoke the relevant international trade rules under which the
contested practice of the third country appears to be unlawful. You will see that Article 2 of the Regulation
defines “international trade rules” as primarily those established by the WTO or since February 2008, those
contained in bilateral Free Trade Agreements.
How then are you expected to know whether any of the rules have been violated? Well, as we have pointed out
earlier, this kind of concern would be addressed when you first approach the Commission prior to lodging your
complaint, and we would assist you by helping to identify the legal questions that would need to be addressed
in order for you to establish a right of action under the relevant international trade rules(5).
Do you need to engage a lawyer to help you? Again this will depend on the complexity of the case and in
practice, certain complaints have been prepared by the complainants themselves without the need of using a
lawyer and others have not.
( 5)
See Annex “illustrative list of obstacles to trade often considered in WTO dispute settlement”
11
Evidence that the obstacle to trade results in injury
or adverse trade effects
The complaint must contain sufficient evidence:
of the existence of injury or adverse trade effects; and
that the injury or the adverse trade effects are caused by the invoked obstacles to trade.
The following elements may be used to provide evidence of injury or adverse trade effects. However, this
list is far from being exhaustive and provides some flexibility:
statistical data on the affected trade flows including factors such as volume of imports, exports,
production, consumption on the third country market and or the Community market, in particular where
there has been a significant variation;
loss of market shares (on the Community markets, the third country market or others countries’ markets).
The consequent impact of the barrier might be demonstrated by changing trends such as profit margins,
capacity, return on capital, investment, employment, prices etc…
Where a threat of injury or a threat of adverse trade effects is alleged, the complaint must illustrate
whether it is clearly foreseeable that a particular situation is likely to develop into actual injury or adverse
trade effects. In either case, the following elements could be used:
the rate of increase of exports to the market where the competition with Community products is taking
place;
export capacity in the country of origin or export, which is already in existence and will be operational in
the foreseeable future and the likelihood that exports resulting from that capacity will be to the market
where the competition with Community products is taking place.
12
Where adverse trade effects are being alleged, the Commission examines the impact of the obstacle to trade
on the economy of the Community or of a region of the Community or on a sector of economic activity therein.
It is important to note that it is possible, especially where the obstacle to trade has an effect on a non-EU
market, that little or no trade actually takes place because the trade flows have been “prevented, impeded or
diverted”. This is also relevant under the TBR, and can also be the basis for a complaint.
Finally, the complaint should also demonstrate that there is a causal link between the adverse trade effects (or
injury) and the WTO incompatible practice that is the subject matter of the TBR investigation. By doing so it
reinforces any possible counter-claim that the adverse trade effects (or injury) are not related to the obstacle,
and have occurred as a result of other factors beyond the control of the country imposing the trade barrier.
13
What can be achieved
by a complaint?
The ultimate aim of the TBR is to eliminate the obstacle to trade, and re-establish a level
playing field. How, then, can this be achieved? The following section provides some
of the scenarios that might be the result of a successful TBR complaint.
Satisfactory steps taken by third country
If following the initiation of the TBR procedure, the third country takes satisfactory steps to eliminate the
obstacle to trade, no action by the Community is required. In that case the procedure may be suspended
or terminated and the Commission will check that the third country respects its undertakings. For this purpose,
a monitoring procedure may be established..
Formal agreement with third country
If after the end of the examination procedure, or at any time before, the third country is willing to negotiate
a settlement with the Commission, the proceedings would be temporarily suspended to allow negotiations
to take place. If an agreement was reached the procedure could be either formally suspended or terminated.
14
Initiation of international (WTO or other)
dispute settlement procedure
If it has not been possible to reach a satisfactory solution and the investigation supports the claims of the
complaint, the case might be brought under the WTO dispute settlement procedure or another appropriate
international mechanism, notably the dispute settlement mechanisms established by bilateral agreements.
It should be noted that an international dispute settlement procedure involves exclusively Governments and
public entities like the EU; private parties do not have direct access to this procedure. The TBR is, therefore, an
instrument which effectively provides industry with an indirect access to the rights deriving from the WTO
Agreements.
Under the WTO dispute settlement procedure, WTO Members are required to try and resolve their dispute by
holding consultations. However if this fails to resolve the dispute, by reaching a mutually satisfactory solution,
the “complaining party” has the right to ask a panel of experts to make an objective assessment of the matter,
taking into account the facts of the particular case and whether the provisions of the WTO agreements have
been violated. The panel submits its written report to the parties directly involved in the case as well as to the
Dispute Settlement Body (DSB) who monitors all WTO Disputes. Whilst there is the right of appeal, the end
result is that whatever the Appellate Body rules, it will be binding (i.e. enforceable) on the parties. Similarly a
panel report, if not appealed, is binding.
If the decision is in favour of the EU:
the third country concerned may accept the outcome and comply with the recommendations of
the dispute settlement body by eliminating the obstacle to trade;
if the third county does not implement the recommendations within a timeframe established by
the WTO Dispute Settlement body or by the panel established under a bilateral Free Trade Agreement,
the Commission may propose to the Council retaliatory measures, which can then be adopted
by qualified majority within 30 days from the transmission of the Commission proposal. The retaliatory
measures can take different forms e.g. withdrawal of concessions, raising of tariffs or the imposition
of quantitative restrictions.
How successful has the TBR been to date?
Since 1996, 25 TBR examination procedures have been initiated. The TBR has been successful in obtaining
results for the complainants in most of the cases, either through action taken by the third country to eliminate
the obstacle to trade or through WTO dispute settlement. In particular, negotiated settlements led to changes
in the legislation or the administrative practice. In certain cases, the actions taken by the third country need to
be monitored.
In other words, to put it in figures: out of the 25 TBR investigations carried out so far,
12 led to satisfactory action by a third country, for which in some cases monitoring is still required;
1 has been terminated since no trade barriers were identified,
1 is still under TBR examination procedure
4 are under review,
7 resulted into WTO dispute settlement cases.
15
Satisfactory actions by third country (monitoring in certain cases)
US – rules of origin for textiles
Brazil – Cognac
Brazil – stainless steel products
Brazil – textiles
Korea – cosmetics
Chile – swordfish
Brazil – Sorbitol
Korea – pharmaceuticals
Argentina – textiles
Columbia – cars
Canada – Bordeaux Médoc
Uruguay – whisky
WTO dispute settlement procedure
US – Antidumping Act 1916 (implemented)
US – music licensing (pending implementation)
Argentina – Hides and skin (partial implementation)
Brazil – regional aircraft (panel procedure terminated)
Korea – subsidies to shipbuilding industry (pending implementation)
Brazil – retreaded tyres (ongoing procedure)
India – wines and spirits (implemented)
Under TBR examination
Chinese Taipei – Compulsory licensing of CD-Rs
Under review
Canada – Prosciutto di Parma
Japan – Leather
US – oilseeds
Turkey – pharmaceutical products
No action required
US – measures concerning imports of prepared mustard
16
TBR: 10 years of experience
The Trade Barriers Regulation (TBR) has been in force now for more than ten years,
since 1 January 1995. During that time it has proved itself to be an effective mechanism
in solving market access problems for European Union producers wishing to export to
third countries.
During the past years the instrument has been used to serve the needs of a variety
of industries and has considered practices of different trading partners. In some of those
cases a solution has been reached through negotiation or action by the third country
and in others by means of WTO dispute settlement proceedings.
Who has the TBR helped?
The TBR investigations that have been carried out so far have dealt with various industry sectors.
Industry sectors that lodged TBR complaints (16)
Cars (1), Spirits (3), Cosmetics (1), Leather (2), Music (2), Textiles (3), Steel (2), Pharmaceuticals (2),
Food industry (2), Regional aircraft (1), Fisheries (1), Agricultural products (2), Shipbuilding, (1)
Tyres (1), Electronics (1), Wine (2).
In what countries have problems occurred?
Countries against which TBR complaints have been lodged (12)
Argentina (2), Brazil (6), Canada (2), Chile (1), Colombia (1), Japan (1), South Korea (3), Uruguay (1), USA (5),
Turkey (1), India (1), Chinese Taipei (1).
17
What type of problems has the TBR investigated?
The trade barriers investigated have been varied:
Indicative list of problems addressed in TBR complaints
Nature of problem
Number of complaints
Transit of products
1
Rules of origin (determination, certificates)
2
Import ban
1
Import licenses
4
Customs valuation of goods
2
Discriminatory taxation
3
Abusive trade defence instruments
1
Lack of protection of appellation of origin / geographical indication
3
Lack of data exclusivity/data protection
1
Subsidies to domestic producers
4
Labelling of products
2
Sanctions in the form of increased customs duties
1
Standards
1
Compulsory licensing
1
Copyright violation
1
Who lodged the complaints?
The complaints lodged with the Commission until now have been made by companies, national industry
associations, and European industry associations. Some were prepared by the complainants themselves and
lawyers were used in particularly complex cases.
Complainant
Individual company
Number
4
National industry association
9 (6)
European industry association
12
Member State
0
( 6)
Three of these, BNIC (Cognac), CIBV (Bordeaux Médoc) and Consorzio di Prosciutto di Parma, are also European associations as the industry is located solely
in one country in each case.
18
TBR Case Studies
The following case studies are examples of the various paths, which have led to solutions
of the problems raised by TBR complaints
Satisfactory action by a third country
Columbia
Tax discrimination on imported motor vehicles
Complaint lodged by Volkswagen AG
on 7 July 2000
Trade barrier:
The Colombian VAT regime on cars, which discriminates against motor vehicles imported
into Colombia of cubic capacity up to 1400 cc.
TBR investigation initiated on 18 August 2000.
Findings of investigation:
The contested practice appears to violate Colombia's obligations under Article III of the GATT 1994
Outcome:
The EU and Colombia reached an agreement according to which Colombia commits itself not to
increase the present tax differential vis-à-vis imported motor cars up to 1400 and to eliminate
the above mentioned VAT differential by 1 July 2005, by means of periodic, regular and continuous
reductions at a rate of 1 or 1.5% every two months. The first reduction will apply on 1 July 2003.
A draft law providing for the above gradual elimination of the VAT differential was adopted by the
Colombian Parliament on 27 December 2002. The TBR procedure was therefore suspended
by decision of the Commission on 20 May 2003.
Finding of a mutually agreed solution.
19
Satisfactory action by a third country
CANADA
Bordeaux Médoc
Complaint lodged by CIVB (Conseil interprofessionnel du Vin de Bordeaux)
on 6 December 2001
Trade barrier:
Lack of protection of the wines with geographical indication “Bordeaux” and “Médoc” Canada.
TBR investigation initiated on 25 May 2002.
Findings of investigation:
The investigation confirmed the complainant's legal claim that the C-57 Amendment to the Canadian
Trade Marks Act violates Articles 23.1 and 2 as well as Article 24.3 (the so called standstill clause)
of TRIPS and that such infringements cannot be justified on the basis of the exception under
Article 24.6 of TRIPS.
Outcome:
On 24 April 2003, the Commission initialled a bilateral agreement with Canada on trade in wine
and spirits, which provided for the definitive elimination of the names listed as “generic” in Canada,
including “Bordeaux”, “Médoc” and “Médoc” by the entry into force of the agreement.
On 9 July 2003, the Commission decided to suspend(7) the examination procedure with a view
to terminate it as soon as the bilateral agreement had entered into force. On 1 June 2004, the bilateral
agreement referred to above entered into force and, as a result, Canada eliminated Bordeaux and
Médoc from the list of generic names provided by the C-57 Amendment. The TBR procedure was
therefore terminated.
Finding of a mutually agreed solution.
( 7)
OJ L 170, 9.7.2003, p. 29.
20
Cases where follow-up action is necessary
KOREAN Regime for imports of Cosmetics
Complaint lodged by COLIPA
on 2 April 1998
Trade barrier:
Korean standard and other requirements that adversely affect import and marketing of Community
cosmetics products in Korea.
TBR investigation initiated on 19 May 1998.
Findings of investigation:
Investigation concluded that the Korean regime for the import and marketing of cosmetics was
contrary to provisions of the WTO Agreement on Technical Barriers to Trade and was causing adverse
trade effects to the Community industry in that imported products were treated differently from
locally produced ones.
Outcome:
As a first positive result, an agreement between the Korean authorities and the European Communities
was concluded in July 1999. This agreement introduced a procedure whereby standards maintained
by Community producers could be considered equivalent to those required in Korea.
The Korean authorities consequently announced their decision to make changes in the regime
for imported cosmetics and they introduced new legislation (24.01.00) and enforcement regulations
(19.07.00) governing cosmetics.
The Commission services then started a monitoring exercise, including close observation of the correct
application of the 1999 agreement and verifying the compatibility of the new legislation and
of the enforcement regulation with the agreement and international trade rules and practices.
Under the monitoring, the Commission services work very closely together with industry and report
regularly to the EU Member States. The EU and Korea are currently discussing EU-proposed “shared
agreed objectives” that would address the remaining obstacles to imports of EC cosmetics into Korea.
21
Cases where follow-up action is necessary
BRAZIL
Textiles
Complaint lodged by FEBELTEX (Belgian Textile Federation)
on 12 January 1998
Trade barrier:
Brazilian non-automatic import licensing system applied for textile products and operating through
compulsory payment terms and minimum prices.
TBR investigation initiated on 27 February 1998.
Findings of investigation
The investigation concluded that the Brazilian authorities refuse to grant import licences for certain
textile products on the basis of non-compliance with minimum prices and compulsory payment
terms. The implementation of this system appears to infringe Brazil's obligations under several
Articles of the WTO Agreement on Import Licensing Procedures (art. 1, 3, 5 and 8) and
of GATT 1994 (art. X and XI.1).
On 14 October 1999, the Community requested WTO consultations, which were held on
19 November 1999. The Commission then decided to try to solve the problems via bilateral
negotiations. As a result, the Brazilian authorities decided to exclude all textile products covered
by the TBR report from the non-automatic import licensing system. The TBR procedure was suspended
by decision of the Commission on 8 June 2001. During the period of suspension, the Commission
services have been monitoring and supervising the situation, in close contact with the Community
industry affected, which alleged that Brazil was imposing minimum prices on the same products
via minimum customs values applied at the time of release for free circulation.
Outcome:
The EU and Brazil signed a Memorandum Of Understanding on textiles trade liberalisation
on 6 November 2002, under which both parties will refrain from applying any non-tariff barriers.
This addressed particularly the problem concerning customs valuation. The Commission services
will monitor the enforcement of the agreement and may envisage terminating the investigation
procedure if the trade barriers are eliminated.
22
ARGENTINA
Measures concerning import of textile and clothing products
Complaint lodged by Euratex (European Apparel and Textile Organisation)
on 11 October 1999
Trade barrier:
Certain measures maintained by Argentina affecting import of textile and clothing products:
repetition of pre-shipment controls and penalising customs valuation procedures; excessive
requirements concerning certificates of origin, impeding transhipment of goods; excessive
requirements concerning customs documentation and labelling.
TBR investigation initiated on 27 November 1999.
Findings of investigation:
the investigation concluded that some of the measures alleged appeared to violate GATT/WTO rules.
In particular, it found that the certificate of origin requirements seemed to violate GATT Articles VIII.1(c),
VIII.3, X and XI.1 as well as Article 7.1 of the WTO Agreement on Textiles and Clothing.
On labelling requirements, the TBR investigation confirmed that they constitute an infringement
of Article 2.2 of the WTO Agreement on Technical Barriers to Trade as well as of Article VIII.1(c) of GATT.
Regarding the repetition of pre-shipment inspection controls and the imposition of specific duties,
no violation of Argentina's specific international obligations was found. They were found, however,
to add to the burdensome formalities required for import of the products under examination
and to create an unfavourable context to trade.
Outcome:
Following the investigation, it was decided to pursue the above matters with the Argentinean
authorities with the aim of achieving an amicable settlement eliminating or gradually easing the above
trade barriers.
With regard to customs valuation practices, the situation seems to have improved over the last three
years. Transparency has improved while European manufacturers and exporters can participate
in the determination of the indicative values for customs valuation. As regards pre-shipment
inspection, it has been eliminated. On the issue of certificates of origin, a new legislation dated
February 2002 seems to soften the current requirements and will consequently facilitate exports
from the EU of goods originating in third countries In terms of labelling, encouraging developments
have also taken place with the introduction of new rules on labelling, complemented by new rules
adopted in 2007. The investigation procedure has therefore been terminated in 2008.
23
Cases where follow-up action is necessary
KOREAN Regime for imports of Pharmaceuticals
Complaint lodged by EFPIA
on 5 June 1999
Trade barrier:
Discrimination in rules and practices concerning pricing and reimbursement of pharmaceutical
products affecting trade of Community pharmaceutical products in the Korean market.
TBR investigation initiated on 30 July 1998.
Findings of investigation:
Investigation concluded that the Korean system for pricing and reimbursement of imported
pharmaceutical products was contrary to provisions of the WTO GATT Agreement and was causing
adverse trade effects to the Community industry in that imported products were treated differently
from locally produced ones. Other problems for the EU industry were related to clinical testing
of new drugs and to the respect of intellectual property of newly developed medicines.
Outcome:
During the course of the investigation, the Korean authorities had significantly changed the legislation
in that the previously existing de jure discriminatory elements had been eliminated so that imported
products were now admitted for the first time on the list of reimbursable pharmaceuticals and
imported products were now reimbursed according to the same rules as domestic products.
Prices of newly imported, mainly innovative R&D based pharmaceuticals were now calculated
on average prices of 7 industrialised countries (the so-called A-7 countries).
Moreover, the Korean authorities introduced a system for reimbursement, based on Actual Transaction
Prices (ATP), thereby eliminating previously existing practices of illegal discounts and they furthermore
introduced an obligatory system of Separation of Dispensing and Prescribing (SDP) which aimed
at eliminating a wide-spread practice of dispensing of drugs by prescribing doctors or institutions
which in the past often led to abusive practices.
In order to appraise the correct application of these major changes to the legislation on pricing and
reimbursement of pharmaceuticals, the Commission services continue to monitor the situation on
the Korean market. During this observation exercises it appeared that, in practice, the rules on pricing
of imported drugs were not correctly applied as too often innovative medicines did not get a standard
drugs price on the basis of the A-7 countries averages.
The Commission services, during the monitoring, have noticed that the Korean authorities have kept
on modifying the pricing and reimbursement rules. This behaviour seems to be mainly inspired
by an increasing need to keep the healthcare-budget under control. Today the pricing and
reimbursement issues are still the main topics in discussions with the Korean side. Clinical testing
and intellectual property issues are equally still included in the list of points for discussion.
At the end of 2006, Korea introduced amendments to its pricing and reimbursement rules.
On 26 December 2006, Korea adopted measures implementing its reformed system.
Despite an exchange of letters between the Commission services and Korean authorities before
the adoption of these measures, some issues of concern remain for the EU pharmaceutical industry.
24
Recourse to WTO dispute settlement
proceedings
Cross-Border Music Licensing in the USA
Complaint lodged by IMRO (Irish Music Rights Organisation)
21 April 1997
Trade barrier:
US legislation on Copyright exempting restaurants, bars, shops or other public venues from
the obligation to obtain licences for the broadcast of music works by radio or T.V, provided certain
conditions are met in terms of floor surface and number of audio-visual devices.
TBR investigation initiated on 11 June 1997.
Findings of investigation:
Investigation found violations of Article 9(1) of TRIP's Agreement and Articles 11 and 11bis
of the Berne Convention.
Outcome:
Informal consultations with the US authorities did not lead to a solution. On 22 December 1998
the Commission decided to initiate WTO dispute settlement proceedings and a Panel was established.
A Panel report condemning the most important part of Section 110(5) was adopted by the Dispute
Settlement Body on 26 July 2000. Before the expiry of the period accorded to the US to implement
the Panel report, the EU and the US reached an agreement of principle on a temporary solution to
offset the losses of affected EU right holders. As part of the agreement, a Panel of arbitrators was
entrusted with the task of determining the extent of those losses. On 9 November 2001, the Arbitrators
fixed the amount of royalty income otherwise due to EU right holders at $1,1 million per year.
On the basis of a lump-sum payment by the US for an amount of $ 3.3 million, the US and the EU
have notified to the WTO a temporary arrangement covering a period of 3 years. However, in order
to achieve a long-term solution, the US is required to bring its legislation into compliance with
the TRIPS agreement.
The complainant is satisfied with the outcome of the investigation, the Panel report and the temporary
arrangement reached with the US. The complainant expects that the amendment of Section 110(5)
will result in benefits for EU right holders in excess of the amount determined by the Arbitrators.
25
Recourse to WTO dispute settlement
proceedings
US Anti-Dumping Act
Complaint lodged by EUROFER
on 10 January 1997
Trade barrier:
US Anti-Dumping Act of 1916 which consists of prohibiting importers from importing or selling articles
from any foreign country at a price substantially less than the market value or wholesale price of such
articles, at the time of importation, in the country of production or other foreign countries to which
they are commonly exported.
TBR investigation initiated on 25 February 1997.
Findings of investigation:
Investigation concluded on violations of GATT 1994 and of the provisions of the WTO Anti-dumping
Agreement and of the Agreement establishing the WTO.
Outcome:
Informal consultations with the US authorities did not lead to a solution. On 28 April 1998
the Commission decided to initiate WTO dispute settlement proceedings. Formal consultations
in that context were not successful and a Panel was established. The Panel and the Appellate
Body found the US in violation of several WTO provisions.
In light of continuous lack of compliance by the US, the Commission has requested WTO authorisation
to apply countermeasures vis-à-vis the US. In February 2004, the WTO recognized the right for the EU
to adopt at any appropriate time a regulation imposing specific obligations on US dumped products.
The US finally repealed the 1916 Act in December 2004.
26
TBR Case concerning KOREA –
Measures affceting trade in commercial vessels
Complaint lodged by CESA (Committee of European Union Shipbuilders Associations)
on 24 October 2000
Trade barrier:
Subsidies granted to, or otherwise benefiting, Korean shipbuilding companies by the Republic of Korea.
TBR investigation initiated on 2 December 2000.
Findings of investigation:
This investigation showed that Korea has granted substantial amounts of subsidies, mainly through
export schemes by the state owned Korean Export-Import Bank (KEXIM), debt forgiveness and
debt-to-equity swaps by government-owned or government-controlled financial institutions.
Furthermore, there was evidence that the subsidies in question were causing adverse effects
to EU industry within the meaning of the WTO Subsidies Agreement, i.e. material injury and serious
prejudice, in several key commercial vessels sectors.
Outcome:
In November 2001, CESA requested the Commission to update the TBR Report, so as to examine
whether adverse effects had been suffered by the EU industry during 2001. The updating investigation
confirmed the findings of the first investigation.
Throughout this time the Commission sought, albeit unsuccessfully, to resolve the dispute in
an amicable way. After the failure of the two last rounds of bilateral negotiations in August and
September2002 between the EU and Korea, the European Commission had no other choice
but to request WTO consultations.
The request was introduced on 21 October 2002. Three rounds of consultations took place on
November and December 2002 and May 2003 but failed to settle the dispute. The EU therefore
requested a panel on 24 June 2003 and the Panel was established at the Dispute Settlement
Body meeting of 21 July 2003. The panel report was issued in March 2005. The Commission services
are currently monitoring the implementation of the Panel's recommendations.
27
Annex
Illustrative list of obstacles to trade considered
in WTO dispute settlement and TBR Investigation
The obstacles to trade often considered in WTO dispute settlement and TBR investigation
include subsidies, tax discrimination, technical regulations, Intellectual property rights
and customs formalities.
Customs formalities
It has long been recognized that the administrative formalities relating to the export and import of goods
(commonly referred to as 'customs laws') can, in themselves, constitute barriers to trade. One may refer to
several customs practices which in practice function as barriers to trade.
First, the customs requirements of all WTO Members rely on large part on the 'value' of the goods
as the basis for assessing the applicable customs duties payable on importation. As a result,
the determination of the 'value' of the imported goods is a fundamental part of the duty assessment
process. Ambiguous or arbitrary valuation methodologies can therefore easily be used to overstate
the value of imported goods, thereby increasing the amount of duties that are payable. Such actions
can seriously impede the free flow of goods across borders and act to undermine the value of negotiated
tariff concessions. The WTO agreement on “Customs Valuation” establishes detailed discipline in this field.
Second, fees connected with importation and exportation may also act as serious trade barriers.
These fees may relate to various services rendered such as consular services, licensing, exchange
controls, inspections and quarantine, sanitation and fumigation. To the extent that the fees charged
are not limited in amount to the cost of the service rendered (the ad valorem fees with no maximum
ceiling is the classical example), they may prove a strong disincentive to export. Exorbitant fees are
usually charged either to generate increased revenue or for reasons of protection of domestic products.
The basic applicable rule is article IX of GATT.
Third, minimum price requirements may also prove an obstacle to the free flow of goods. In particular,
requirements that prohibit the importation of goods below a certain price constitute one of the worst
restrictions in international trade and are contrary to article XI GATT.
28
Intellectual property rights (IPRs)
Intellectual property rights are the rights given to persons over the creations of their minds. They usually give
the creator an exclusive right over the use of his/her creation for a certain period of time. Such exclusive right
are generally subject to a number of limitations and exceptions, aimed at fine-tuning the balance that has to
be found between the legitimate interests of right holders and of users.
The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) narrowed the gaps in
the way these rights are protected around the world, and brought them under common international rules.
Copyright
The rights of authors of literary and artistic works (such as books and other writings, musical compositions,
paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of
50 years after the death of the author. Also protected through copyright and related rights are the rights of
performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and broadcasting
organisations.
Industrial property
Industrial property can usefully be divided into two main areas:
Distinctive signs
These are in particular trademarks (which distinguish the goods or services of one undertaking from those
of other undertakings) and geographical indications (which identify a good as originating in a place where
a given characteristic of the good is essentially attributable to its geographical origin).
The protection of such distinctive signs aims to stimulate and ensure fair competition and to protect
consumers, by enabling them to make informed choices between various goods and services.
Others
Other types of industrial property are protected primarily to stimulate innovation, design and the creation
of technology. In this category fall inventions (protected by patents), industrial designs and trade secrets.
The protection is usually given for a finite term (typically 20 years in the case of patents).
29
Possible violations
Possible violations of intellectual property rights include:
Legislation which does neither guarantee national treatment to nationals of WTO Members nor
the automatic and unconditional extension of any advantage, favour, privilege or immunity granted
to nationals of any other country to nationals of all WTO Members (so-called obligation to grant
most-favoured nation treatment);
Legislation limiting IPRs in breach of TRIPs' rules (e.g.: duration of copyrights for less than 50 years,
duration of patents for less than 20 years, lack of prohibition to use wine names in connection
with “style”, “kind”, “type”);
Legislation interpreting in a too extensive manner the exceptions provided by the TRIPS Agreement
(e.g.: geographical indications improperly considered as generic);
Breach of the enforcement provisions of TRIPs;
Technical regulations
Technical regulations and industrial standards vary from country to country. Producers and exporters have to
adjust to different regulations and standards in order to market their products. If the standards are set arbitrarily,
they can become obstacles to trade. EU industries and companies can rely on the Agreement on Technical
Barriers to Trade (TBT) to ensure that regulations, standards, testing and certification procedures in third
countries do not create unnecessary obstacles.
The TBT agreement applies to a broad range of measures: composition of goods, design requirements,
packaging and labelling requirements etc. It applies both to mandatory regulations laying down product
characteristics, and to voluntary standards. Not only technical measures adopted by central governments are
subject to trade disciplines: the TBT agreement also includes provisions describing how local government and
non-governmental bodies should apply their own regulations.
The TBT agreement forbids discrimination against imported goods through more burdensome design or
testing requirements. WTO Members must also ensure that their technical regulations are not more trade
restrictive than necessary to achieve their legitimate objectives. The procedures used to decide whether a
product conforms to national standards have to be fair and equitable.
In order to promote greater convergence between national technical regulations and standards, the
agreement requires countries to use international standards as a basis for their regulations where these are
appropriate to fulfil the legitimate goals pursued.
30
Subsidies
WTO Members have undertaken to discipline subsidies through the Agreement on Subsidies and
Countervailing Measures. This discipline exists because it is recognised that subsidies on the whole involve a
misallocation of resources, which can potentially distort trade and cause adverse effects to competing nonsubsidised enterprises.
Under WTO law, a “subsidy” is broadly defined as a financial contribution from a government, which confers a
benefit on the recipient, which he could not otherwise obtain in the market. For example, a non-repayable
transfer of government funds, such as a grant or a tax exemption to a company would obviously fall into this
category. In other cases, a comparison with the market is necessary to establish whether a subsidy exists. For
example, a Government loan would only involve a subsidy if it were granted on more favourable terms than
the market i.e. a loan at below market rates; the same consideration applies to loan guarantees, equity infusions
and the Government provision of goods.
It is important to note that subsidy disciplines apply only to benefits, which result from a financial intervention
by Governments. Many kinds of Government actions confer benefits but cannot be considered as subsidies. For
instance, if a Government lowers social or, especially relevant today, environmental standards, this may reduce
companies’ costs and confer a benefit, at least from the purely selfish point of view of the company. However,
as there is no financial contribution from the Government, it is not a subsidy and cannot be subject to remedies
against subsidies. Similarly, an export ban on steel scrap may benefit still producers by reducing the price of
their raw material; this is not a subsidy. Another example is customs tariff increases – these benefit companies
by granting them protection, but the Government gains rather than forgoes revenue.
Not all subsidies can, however, be challenged. Certain kinds of subsidies are, in that respect, viewed more
favourably than others. For instance, subsidies which apply across the board in the territory of the government
which grants them, and thus do not give certain firms an advantage over others, are not normally considered
to distort trade. An example may be a lower rate of corporate income tax for Small and Medium Enterprises
so-called non-specific subsidies. Under WTO law, no action can be taken against a non-specific subsidy.
On the other hand, specific subsidies e.g. those limited to certain enterprises, potentially can distort trade and
can, therefore, be challenged, if they cause adverse effects (e.g. injury to domestic industry, displacement of
exports, price undercutting) to other WTO Members; these are referred to as “actionable” subsidies. Proof of
such effects needs of course to be provided before any action is taken.
Finally, certain subsidies are considered to have in all circumstances, by their very nature, a direct negative effect
on trade and are, therefore, outrightly prohibited: these are export subsidies and subsidies which favour the
use of domestic rather than imported products. For example, government loans at preferential rates provided
only to exporters or tax exemptions based on the percentage of domestic parts used in production.
31
Tax discrimination
Article III:2 of GATT 1994 establishes the principle of National Treatment, which creates on WTO members the
obligation to treat, imported products in the same way as domestic ones. In other words, it prohibits WTO
members from imposing on imported products discriminatory taxes not applicable to domestic goods.
In order to establish the compatibility of a measure with Article III:2 of GATT 1994, it is necessary to examine
whether imported products are "like products" or "directly competitive or substitutable products" to domestic
products. Rules are more stringent for the former than for the latter.
Like products
If imported products are “like” to domestic ones, then their taxation should be identical. In other words,
if imported products are found to be taxed in excess of domestically produced products, even by very small
(de minimis) margins, there is discrimination and consequently a violation of the national treatment principle.
The term “like product” is not defined in GATT; the interpretation of the term should, therefore, be examined on
a case-by-case basis. This would allow a fair assessment in each case of the different elements that constitute
likeness. To establish whether imported products are “like” to domestic products similarities in their physical
characteristics (i.e. the product's properties, nature and quality such as raw material, outlook, colour,
presentation, and packaging) are very important. In addition, one needs to examine elements such as their
production techniques and methods (including distillation, filtration, colouring or ageing processes), the
product's end-uses in the market in question and their tariff classification.
Directly competitive or substitutable products
If imported products are “directly competitive or substitutable products” to domestic ones, then very small
(de minimis) differences in taxation are permitted (e.g. a difference of 0.5% could perhaps be tolerated but not
a difference of 3%). Furthermore, for a violation to be found it would need to be established that the heavier
taxation of the imported products is applied in order to “afford protection” to domestic production. As the
establishment of the intent of the legislator is not always easy or self-evident, in deciding this issue, it would be
necessary to look at the overall design, architecture, and structure of a measure.
When are imported and domestic products “directly competitive or substitutable”? Although this category
is broader than the category of “like” products, it must still be determined on a “case-by-case” basis by
reference, however, primarily to the consumers' perception in the market in question. Accordingly, information
on the common end-uses (whether products are used in similar settings and for similar purposes), on the
marketing strategies (distribution channels and points of sale), must be provided; in addition, one must look
to their physical characteristics, cross-price elasticity, demand in other markets and tariff classification.
32
Published in all the EU languages by the European Commission’s Directorate General Trade.
The information contained in this brochure does not necessarily reflect
the official positions of the European Union.
Neither the European Commission nor any person acting on its behalf is responsible
for the use which might be made of the information which follows.
Use of the text, in whole or in part, is authorised provided the source is acknowledged.
© European Commission, 2008
ISBN 978-92-79-07476-9
Design/Illustrations/Pre-press: Mostra Communication
Printed in Belgium, February 2008
NG-70-07-102-EN-C
Trade Barriers Regulation [ TBR ]
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http://ec.europa.eu/trade/issues/respectrules/tbr/index_en.htm
For further information I DG Trade I Unit F2 (Legal Aspects of Trade Policy) I Tel. +32 2 295 39 18 I E-mail : trade-tbr@ec.europa.eu
European Commission I Directorate General Trade